I’m a huge fan of Felix Salmon’s website, although I don’t think “a slice of lime in the soda” is going to beat “The Republic of Letters has a new address,” but Felix certainly comes a cropper with this installment, “The Smart and Charming Larry Summers.” Felix admits to not being much of a fan of Larry, given his sordid past (see Felix on “How Larry Summers lost Harvard $18 billion,” and Steve Sailor on how Larry cost Harvard $28 billion in the Andrei Shleifer/Russia Project affair), but admits to being knocked over by Larry’s recent interview in Fortune. After making fun of the Winklevii* for wearing coats and ties, Larry treats us to, according to Felix, at least, “one of the best summaries of our present macroeconomic situation that I’ve seen.” In said summary, Larry makes a pitch for a renewed stimulus program:
It is crazy if you think about it, that we have schools across this country where we tell our kids that education is the most important thing in the world, but we ask them to study in classrooms where the paint is chipping off the walls.
We can borrow money to invest in fixing that, at 2.8 percent. Twenty percent of the people in the country who are doing construction are unemployed, and we’re not trying to do something about that, when we have a major demand problem? It just doesn’t make any sense.
We have infrastructure in this country — I mean you can argue whether we need a new high speed rail system or whether we don’t need a new high speed rail system. But I don’t know what the argument is for letting bridges collapse. I don’t know what the argument is.
I mean every time, and unfortunately it’s fairly often, I fly in and out of Kennedy Airport to any other airport in the world that you might fly to from Kennedy — you can fly to Europe, you can fly to Asia, any of those places, and you compare Kennedy Airport with the airport where you land, and you ask yourself which is the airport of the greatest country, richest, most powerful country in the world?
Excuse me, but do you have to be the smartest guy in the room to talk like this? I can read this, more cogently expressed, in Paul Krugman or Brad DeLong every day (and in fact I do). Is paint chipping from the walls really a problem with most American schools? As for bridges falling down, bitching about infrastructure has been an institution in the U.S. for the past thirty years, and the country’s still standing, pretty much. And, while it certainly is a shame that Kennedy isn’t, shall we say, worthy of Larry Summers, I’m not so sure we have to drop $50 billion on bringing the place up to his standards.†
More to the point, Larry shows himself to be—or perhaps more accurately makes himself appear to be—ignorant of Keynes’ classic argument regarding stimulus spending. The money doesn’t have to be spent on worthy projects, or moral projects, or constructive projects. It just has to be spent. A tax cut would be the perfect stimulus if people would just spend the money, instead of saving it or paying off debt. It doesn’t matter if they spend it on a new kitchen, or a trip to Vegas, or online porno. They just have to spend it.
*Is anyone starting to feel sorry for these guys? At least they didn’t cost Harvard $46 billion, eh?
†But maybe Larry could talk Harvard into picking up the tab, eh? Ha, ha.
